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Why Zumiez Stock Popped 14%

By Rich Smith – Updated Jun 7, 2019 at 11:59AM

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Zumiez zooms higher after earning a profit instead of a loss.

What happened

Shares of Zumiez (ZUMZ 0.70%) are up strongly this morning --14% as of 11:40 a.m. EDT -- after the youth-oriented clothing chain reported a surprise fiscal first-quarter 2019 profit last night.

Expected to report losses of $0.09 per share on sales of $206 million, Zumiez instead said it earned $0.03 per share on sales of $213 million.

Cartoon of a man on a scooter riding a red up arrow.

Image source: Getty Images.

So what

This story gets better. Analysts had predicted Zumiez's sales would flatline, showing no growth year over year and with losses only slightly less bad than the company endured a year ago. Instead, sales grew 3% and the company turned from a loss to a profit.

What's more, Zumiez may have momentum moving forward. CEO Rick Brooks noted that the company enjoyed "strong performance in the last two months of the first quarter," which would seem to suggest that the business is improving as the year moves along.

Now what

Don't get too excited, though. Analysts who follow Zumiez are already expecting the company to show sales growth in Q2 -- albeit only 2%, with total quarterly sales of $223.6 million. Now, management isn't ruling out that possibility. Zumiez's guidance given in conjunction with its earnings release suggests a likely revenue range of from $220 million to $224 million.

Still, taken at the midpoint ($222 million), that guidance suggests Zumiez could miss sales in Q2. And management is only promising to earn between $0.14 and $0.20 per share on those sales. Wall Street wants to see all $0.20.

Unless Zumiez beats its own expectations again in Q2, today's enthusiasm for the stock could evaporate fast.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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